What's the cure for home-lending market?

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KAI RYSSDAL: It's not often you sit down and can't quite figure out where a story starts. But today's developments in the housing market present exactly that problem.

In no particular order . . . We learned today adjustable-rate mortgage delinquencies are up. Specifically, in the already-troubled subprime market. Mortgage rates, meanwhile, have hit their highest point in a year. Freddie Mac said today homebuyers will pay 6.7 percent for a 30-year-fixed. And Wall Street powerhouses Goldman Sachs and Bear Stears announced their quarterly profits suffered at the hands of their mortgage portfolios.

There's no shortage of ideas on how to deal with ailing borrowers and lenders. Fed officials heard some of them at a hearing today in Washington. But Marketplace's Bob Moon reports the central bank's being urged not to overreact.

BOB MOON: The patient's condition is delicate. Fed officials made it clear today they're walking a fine line between curing the nation's mortgage ills, but preserving incentives for responsible lending.

The housing slump is getting worse, not better, and the Fed is under pressure from Congress to quickly use or lose its legal authority over the mortgage industry.

Some consumer advocates says treatment is years overdue. At the National Consumer Law Center, attorney Alys Cohen says state laws protecting borrowers are inconsistent, and that calls for a federal fix:

Alys Cohen: The only way to really keep up with this is to have a rule that says mortgage companies who are acting in an unfair or deceptive way are liable to the homeowner, and the homeowner can protect themselves with such a rule.

Some kind of action is needed, says Chicago Sun-Times personal finance columnist Terry Savagea€¦to stop the abuses that got us into this mess:

Terry Savage: Many of those mortgages originated by brokers who were in it for the flat fees, a thousand dollars for every mortgage they turned in to a mortgage company. Many people committed fraud, others were duped into committing fraud by mortgage brokers.

The Mortgage Bankers Association sought to emphasize the flip side of its foreclosure report today, pointing out 8 in 10 holders of subprime adjustable mortgages are paying on time. Still, the association's Doug Duncan concedes lenders have mounted what he calls an "all-hands-on-deck" effort to work with borrowers:

Doug DUNCAN: They are aggressively restructuring loans for people who largely due to circumstances beyond their control are in some difficulty.

SAVAGE: It's a blight on our cities, it's a hit to our financial institutions, and in the end, we all pay.

In Los Angeles, I'm Bob Moon for Marketplace.

Bob Moon

Bob Moon is Marketplace’s senior business correspondent and occasional fill-in host for Marketplace, Marketplace Morning Report and Marketplace Money. He previously served for five years as New York bureau chief.